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| 8-K - FORM 8-K - DESTINATION XL GROUP, INC. | d455415d8k.htm |
 Investor Presentation
December 2012
1
Exhibit 99.1
Generating
Value
on
the
Road
to
Destination
XL
® |
 2
Safe Harbor
Certain information contained in this presentation, including, but not limited to, cash flows,
operating margins, store counts, earnings expectations for fiscal 2012 and estimates
through fiscal 2016, constitute forward-looking statements under the federal
securities laws. The discussion of forward- looking information requires management
of the Company to make certain estimates and assumptions regarding the Company's
strategic direction and the effect of such plans on the Company's financial results.
Such forward-looking statements are subject to various risks and uncertainties that could cause
actual results to differ materially from those indicated. Such risks and uncertainties may
include, but are not limited to: the failure to implement the Company's business plan
for increased profitability and growth in the Company's retail stores sales and
direct-to-consumer business, the failure to achieve improvement in the
Company's competitive position, changes in or miscalculation of fashion trends, extreme
or unseasonable weather conditions, economic downturns, a weakness in overall consumer
demand, trade and security restrictions and political or financial instability in
countries where goods are manufactured, increases in raw material costs from inflation
and other factors, the interruption of merchandise flow from the Company's distribution
facility, competitive pressures, and the adverse effects of natural disasters, war,
acts of terrorism or threats of either, or other armed conflict, on the United States
and international economies. These, and other risks and uncertainties, are detailed in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for
the fiscal year ended January 28, 2012 filed on March 16, 2012 and other Company
filings with the Securities and Exchange Commission. Casual Male assumes no duty to
update or revise its forward- looking statements even if experience or future
changes make it clear that any projected results expressed or implied therein will not
be realized. |
 Who
is Casual Male Retail Group? 3
Largest multi-channel specialty
retailer in niche men’s big and
tall (B&T) market
Offering unique blend
of wardrobe solutions
Private label & leading
apparel name brands |
 CMRG by the Numbers
4
Active customers
Enrolled in loyalty program
Highest rated retailer
in 2011 CSI
Customer Survey
Retail
Direct
Retail Stores
Brands
Customer
Satisfaction |
 Who
is Our Customer? 5
Males with a waist size 42”
and
greater (35M men in US).
Determined by physical
characteristic, not demographic.
Not dependent on age, income,
race or nationality
Seeking greater selection in size.
Values convenience, selection
and fit over price. |
 6
Attractive Big & Tall Segment
Men’s B&T market annual sales
approximately
Current
CMRG
market
share
of
~
11%
B&T men account for
approximately 11% in U.S.
Growing at nearly twice the rate of the
regular size men’s apparel market
B&T consumers shop 50% more
for apparel on the Internet than
regular size consumers
New CMRG marketing strategy focuses
on direct sales through digital platforms
Highly fragmented market
Opportunity to take share by offering
one-stop shop solution
$3.5
-
$4B |
 7
Why Invest in CMRG?
Accelerated conversion to
DXL concept creates
compelling investment
opportunity
Leader in large and growing
B&T market
Strong gross margins; Ability
to greatly improve operating
margins
Three-year $150M investment
in DXL rollout to be
funded by free cash flow,
including use of $47 million
in tax benefits
Significant market
share/sales growth
opportunity
Strong, debt-free balance
sheet |
 8
Our Current Casual Male XL Stores |
 9
What Our Customer Wants
Large
changing
rooms
More brand
selections
Suggested
wardrobe
solutions
Wide aisles
One-stop
shopping
Bright
atmosphere
On-site
tailoring |
 10
Opened 4 DXL
concept stores
Opened 31 DXL stores
Opened 12
DXL stores
Opportunity for accelerated growth and profitability
Responding
with
DestinationXL
® |
 DXL
Schaumburg, IL
0.9 miles
9451 Schaumburg, IL
9183 Niles, IL
11.4 miles
9512 Bloomingdale, IL
11.2 miles
11
Market Consolidation to DXL
Chicago Metro
Chicago Metro
Customers are willing to drive up to 20 miles |
 12
Average
Store size
3,400 sq. ft.
8,000 sq. ft.
Sales per sq. ft.
$166
$175 ($229 by 2016)
Build out costs
$50
$70
Occupancy costs
$30
$30
Dollars per
transaction
$101
$142
Style choices
600
2,000
Private label brands
10
15
Name brands
8
30
Casual Male XL vs. DestinationXL
®
|
 13
Large Selection of Name Brands |
 14
|
 15
|
 16
|
 17
|
 18
|
 19
|
 20
DXL Comps Reflect Growth Opportunity
*Total CMRG Comparables include all stores and direct channel
10 stores
14.5%
14 stores
9.0%
14 stores
12.8%
20 stores
16.3%
29 stores
17.1%
31 stores
13.8%
0.7%
0.8%
2.1%
2.0%
2.0%
1.5%
0.0%
5.0%
10.0%
15.0%
20.0%
Q3 2011
Q4 2011
FY 2011
Q1 2012
Q2 2012
Q3 2012
DXL Comparables
Total CMRG Comparables* |
 Comparable Sales Definition
•
Comparable
sales
for
all
periods
include
retail
stores
that
have
been
open for at least one full fiscal year.
•
Stores that have been remodeled, expanded or re-located during the
period also are included in determination of comparable sales.
•
Most DXL stores are considered relocations and comparable to all
closed stores in each respective market area.
•
Direct businesses are included in the calculation since CMRG is a
multi-channel retailer.
21 |
 22
Compelling DXL Returns
Better leveraging of expenses --
occupancy, labor productivity and
local/district management
Projecting higher 4-wall profits
than combined profits of individual
stores
Targeting between 25%-30% store
operating margin
Potential to capture additional
market share
Opportunity to improve
operating margins
Expect to significantly increase
margins after the transition to DXL
is complete
Attract new customers
Better cross-selling environment
to capture greater share of apparel
wallet from existing customers
Expect greater store productivity
and profitability |
 23
Accelerated DXL Openings
2015 Store Count Target
DestinationXL
®
225-250
Casual Male XL
Outlet
~50
Rochester Clothing
5
Accelerated rollout based on
success of DXL stores in 2011
0
50
100
150
200
250
300
350
400
450
500
2010
2011
2012
2013
2014
2015
Total Stores:
(460)
(450)
(413)
(350)
(309)
(280-305) |
 24
DXL Sales Increase as % of Total Revenue
* DXL sales include direct sales via the DXL website.
|
 25
2012
Commence new marketing strategy
Open
32
DXL
stores
/
Close
69
CMXL
stores
Operating
margins
in
the
range
of
4%
-
5%
CapEx expected to be $35M
2013
Open
60
DXL
stores
/
Close
120
CMXL
stores
Operating
margins
in
the
range
of
4%-5%
Lease exit and asset impairment charges in the the
range
of
$8-$12M
CapEx
expected
to
peak
at
$45M
2014
Open
60
DXL
stores
/
Close
100
CMXL
stores
Operating
margins
in
the
range
of
5%
-
6%
Lease exit and asset impairment
charges
in
the
range
of
$5-$7M
CapEx expected to
be $40M
Accelerated Rollout of DXL
* Net of subleases
*
*
2012
2012
-
-
2014
2014 |
 26
Accelerated Rollout of DXL
* Net of subleases
2015
Complete
rollout
with
225
-
250
opened
DXL
stores
and
Closure
of
remaining 60
Casual Male XL anchor stores
Operating
margins
gain
traction
and
increase
to
8%
-
9%
(from 4.2% in ‘11)
CapEx expected to be approximately $35M
Lease exit and asset impairment charges in the range
of $2-$4M*
2012
2012
-
-
2014
2014
2015
2015 |
 27
2016
Full benefit of DXL concept drives revenue >$600M
Open average of 10 DXL stores per year
Approximately
50
CMXL
outlet
stores
and
5
Rochester Clothing stores remain open
Operating margins >10%
Accelerated Rollout of DXL
Generating
free
cash
flow
in
the
range
of
$55
2016
2016
2015
2015
2012 -
2012 -
2014
2014
-$65M |
 28
DXL Customer Purchase Funnel*
Addressable Population
Aware of DXL
Visiting DXL
Purchasing
from DXL
Repeat
DXL’s addressable market is primarily men with over 40”
waist
Awareness of DXL is low across its markets, directly impacting
ability to attract new customers
Of those aware of DXL, only 8% are visiting the store
73% of those that visit the store make a purchase
89% of those that make a purchase
intend to return
*Based on consumers’
stated responses per L.E.K’s survey within DXL markets
Source: L.E.K analysis
Increased Awareness = Opportunity |
 29
Launched DestinationXL
rebranding initiative
Engaged
advertising firm
Hired Chief Marketing
Officer in June 2012
Identified
target customers
Began developing
marketing strategy
Developed balanced
marketing budget
Raising
DestinationXL
®
Awareness |
 Opportunity to Grow Market Share
•
Capture greater wallet share with DXL concept
–
Expansive selection blending private label/name brand apparel
–
Appealing shopping environment
–
Opportunity to grow clothing business with more complete solution
•
Attract a broader customer audience with one-stop-shop
•
Target “end-of-rack”
customers
–
42”-46”
waist size
–
Younger than traditional Casual Male customer
–
65% of B&T market / 20% of current sales
–
Adding regular XL/XLT size in 2013
•
Paradigm shift in marketing improves awareness
•
Improve direct business with new website
30 |
 Financial Performance
31 |
 32
Sales and Gross Margin
Strong gross margins provide opportunity for
significant sales leverage
$465.4
$464.1
$444.2
$395.2
$390.0
$397.7
$284.8
44.5%
44.4%
42.7%
44.2%
44.9%
47.0%
46.1%
38%
40%
42%
44%
46%
48%
50%
$0
$100
$200
$300
$400
$500
2006
2007
2008
2009
2010
2011
2012 YTD
Revenue ($ mm) |
 33
* Before impairment charge of $23.1m
Operating Margin & Comparable Sales
Focus on improving operating margins
through greater DXL sales
2.2%
4.2%
5.5%
2.3%
(1.3)%
2.0%
4.1%
4.2%
2.4%
(15%)
(10%)
(5%)
0%
5%
10%
15%
2004
2005
2006
2007
2008
2009
2010
2011*
2012 YTD
CMRG Annual Historic Operating Margin
4.4%
4.5%
9.0%
2.0%
(1.3)%
(10.8)%
1.5%
2.1%
1.5%
(15%)
(10%)
(5%)
0%
5%
10%
15%
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD
CMRG Historical Annual Comp Sales |
 34
Strict Expense Management
$28.6
$30.9
$34.4
$34.1
$19.1
$19.0
$19.6
$13.6
$151.9
$168.8
$178.1
$178.1
$151.0
$150.9
$154.8
$113.1
36.0%
36.7%
38.4%
42.7%
38.2%
38.3%
38.9%
39.7%
30.0%
33.0%
36.0%
39.0%
42.0%
45.0%
$0
$50
$100
$150
$200
2005
2006
2007
2008
2009
2010
2011
2012 YTD
($ mm)
Marketing Expense
Total SG&A
SG&A as a Percentage of Sales |
 2007
2008
2009
2010
2011
Q3
2012
$117.8M
$98.6M
$90.0M
$92.9M
$104.2M
$116.1M
$41.0M
$38.7M
$3.5M
-
-
$7.6M
-
-
-
$4.1M
$10.4M
$5.2M
$17.3M
$12.5M
$7.6M
-
-
-
35
Strong Debt-Free Balance Sheet
Inventory
Borrowing under
revolver
Cash on hand
Fixed term loan |
 *Free cash flow is defined as cash flow from operating activities,
less capital expenditures and discretionary store asset acquisitions. 36
$(13.6)
$(9.7)
$7.6
$26.2
$10.0
$5.4
$(12.9)
$22.7
$21.4
$12.6
$4.6
$9.0
$18.0
$21.3
($20)
($10)
$0
$10
$20
$30
($20)
($10)
$0
$10
$20
$30
2006
2007
2008
2009
2010
2011
2012 YTD
($ mm)
Free Cash Flow
CAPEX
Free
Cash
Flow
*
and
CapEx |
 Why Invest in CMRG?
•
Accelerated conversion to DXL concept creates compelling
investment opportunity
–
Investment to be funded by operating cash flow
•
Leader in large and growing B&T market
•
Strong gross margins
•
Ability to greatly improve operating margins
•
Three-year $150M investment in DXL rollout to be funded
by free cash flow, including use of $47 million in tax benefits
•
Significant market share/sales growth opportunity
–
Goal of increasing share from 11% to 17.5%-20% by 2015
–
Increasing DXL brand awareness
–
Expanding customers to include “end-of-rack”
–
Improving direct sales business
•
Strong, debt-free balance sheet
37 |
 For additional information:
Jeffrey Unger
Casual Male Retail Group, Inc.
V. P. Investor Relations
561-482-9715 Office
561-543-9806 Cell
jeffunger@usa.net
www.destinationxl.com
38 |